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Thursday, 12 June 2014

Gap’s entry to Burma could bring more good tidings, MGMA says

Gap’s entry into Burma could attract more foreign buyers into the fledgling garment industry, thus improving work conditions and increasing employment for workers, the chairman of Myanmar Garment Manufacturers Association (MGMA) said on Monday.

Retail giant Gap Inc announced on Saturday that they have started sourcing products from two South Korean-owned factories in Rangoon, making them the first US company to enter the garment sector since trade sanctions were eased in 2012.

With its experience in other countries, MGMA chairman Myint Soe said that Gap’s presence is a “good opportunity” for improving workers’ rights while increasing productivity.“Having more companies like Gap invest in Burma will create a lot of job opportunities, and as it is a responsible investor, it can improve the rights and working standards for garment workers, making conditions better than they are now,” Myint Soe said, adding that Burma’s primary garment investors, Japan and South Korea, often focus on more detail-oriented clothing, which reduces productivity.

“Companies like Gap, they prioritise quantity while also accepting decent quality products – and they are not as strict as Japan or South Korea. I hope this will make work more convenient for our workforce and improve their productivity,” he said.

After a trade embargo was slapped on Burma by the US in 2003 for its use of child labor, the once-profitable apparel industry dropped from $800 million in apparel exports to $300 million. After the US and EU eased sanctions in late 2012, the industry saw a steady increase in exports to about $1.2 billion in 2013, a 33 percent increase from the year before.

But major brands have been slow to enter, making Gap’s investment a significant step for the sector. According to Courtney Wade, a Gap spokeswoman, the two factories will be producing outerwear for Old Navy and Banana Republic outlets. A company fact sheet also said that Gap’s investment in the two factories will create jobs for about 4,000 people.

She declined to name the factories or their locations, citing competitive reasons.

While Gap is the first American brand in Burma, but it is not the first major clothing company. Swedish fashion brand Hennes & Mauritz – the second largest global retailer by sales – has been placing test orders from Burma since 2013, said company spokeswoman Andrea Roos, and is currently sourcing products from three Rangoon factories and one manufacturer in Pegu [Bago] Division.

“H&M is an expansive company and we always look for new potential sourcing markets,” Roos said, declining to name details on the production value or future investments. “Our presence in our production markets is long-term.”

Despite the interest, Myint Soe said that the industry still faces major challenges, such as the high cost of land prices for new factories and a lack of infrastructure.

“The government has to improve the infrastructure, such as for ports, transportation systems, electricity and communication lines,” Myint Soe said, adding that growing industrial unrest in the sector is troubling as well.

“The issues we are seeing between garment workers and their employers is not a good sign. They need to negotiate and be more cooperative with one another,” he said. “Otherwise, the garment sector will get stuck midway to development despite having the opportunities.”

Steve Marshall, liaison officer for the International Labor Organisation in Burma, said that in terms of minimum wage and labor rights issues, it is crucial for MGMA to play “a key role”.

“Clearly, it is early days in the reform/transition process [to enter this market], with a number of business risks remaining,” Marshall said in an email. “However, responsible investment working within national laws and recognising internationally accepted fundamental principles and rights at work has the potential to support both the social and economic reform objectives.”

“The question of timing will no doubt be informed by each company’s due diligence process,” he said.